EXHIBIT d.5
Sub-Advisory Agreement
This Sub-Advisory Agreement (the "Agreement") is effective as of October 3,
2005, by and among American Fidelity Dual Strategy Fund, Inc., a Maryland
corporation (the "Fund"), American Fidelity Assurance Company, an insurance
company organized under the laws of the State of Oklahoma (the "Advisor"), and
Wedge Capital Management LLP (the "Sub-Advisor").
RECITALS
A. The Fund is engaged in business as an open-end, diversified management
company and is registered as such under the Investment Company Act.
B. The Advisor has entered into Management and Investment Advisory
Agreement dated as of May 1, 2003 with the Fund (the "Advisory Agreement"),
pursuant to which the Advisor acts as investment advisor to the Fund.
C. The Sub-Advisor is engaged principally in the business of rendering
investment advisory services and is registered as an investment advisor under
the Investment Advisers Act.
D. The Advisor and the Fund desire for the Sub-Advisor to furnish
investment advisory services to the Advisor and the Fund with respect to certain
assets of the Fund, and the Sub-Advisor is willing to render such investment
advisory services.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS: Unless otherwise defined in this Agreement, capitalized
terms shall have the meanings commonly ascribed to them in the federal
securities laws and related rules and regulations. In addition, the following
terms shall mean:
(a) Advisor: As defined in the introductory paragraph of this
Agreement.
(b) Custodian: InvesTrust, N.A. a special purpose bank chartered by
the Office of the Comptroller of the Currency.
(c) Fund: As defined in the introductory paragraph of this Agreement.
(d) Investment Advisers Act: The Investment Advisers Act of 1940, as
amended.
(e) Investment Assets: Those assets of the Fund as the Advisor and the
Fund shall specify in writing, from time to time, including cash, stocks, bonds
and other securities that the Advisor deposits with the Custodian and places
under the investment supervision of the Sub-Advisor, together with any assets
that are added at a subsequent date or which are received as a result of the
sale, exchange or transfer of such Investment Assets.
(f) Investment Company Act: The Investment Company Act of 1940, as
amended.
(g) Majority Vote of Shareholders: The vote, in accordance with
Section 2(a)(42) of the Investment Company Act, at an annual or a special
meeting of the Shareholders of: (i) sixty-seven percent (67%) or more of the
voting securities present at the meeting, if the holders of more than fifty
percent (50%) of the outstanding voting securities of the Fund are present or
represented by proxy, or (ii) more than fifty percent (50%) of the outstanding
voting securities of the Fund, whichever is less.
(h) SEC: The Securities and Exchange Commission.
(i) Securities Act: The Securities Act of 1933, as amended.
(j) Securities Exchange Act: The Securities Exchange Act of 1934, as
amended.
(k) Shareholders: The beneficial owners of the Fund's securities.
(l) Sub-Advisor: As defined in the introductory paragraph of this
Agreement.
2. APPOINTMENT OF THE SUB-ADVISOR. Effective as of the date hereof, the
Advisor hereby appoints the Sub-Advisor to serve as investment advisor to the
Advisor with respect to the Investment Assets of the Fund, and the Sub-Advisor
accepts such appointment and agrees to render the services and to assume the
obligations set forth in this Agreement.
3. THE INVESTMENT ASSETS. Subject to supervision by the Advisor and the
Fund's Board of Directors, the Sub-Advisor shall manage the investment
operations of the Investment Assets. The Advisor may make additions to or
withdrawals from the Investment Assets in any amounts the Advisor determines
appropriate or necessary.
4. CUSTODIANSHIP OF THE INVESTMENT ASSETS. The Investment Assets have been
deposited with the Custodian and are maintained by the Custodian in safekeeping
on its premises, in a recognized clearing corporation, or in the Federal Reserve
book-entry system, in the name of the Fund, the Custodian or the clearing
corporation, or in the nominee name of any of these. The Advisor will give the
Sub-Advisor prior notice if any other entity is appointed to serve as Custodian
for the Investment Assets. The term "Custodian" includes all successors to the
presently serving Custodian. The Sub-Advisor shall have no responsibility or
liability for custody arrangements or for the actions or omissions of the
Custodian.
5. MANAGEMENT OF INVESTMENT ASSETS.
5.1 GENERAL POWERS AND DUTIES.
(a) General. For the term of this Agreement, the Sub-Advisor,
subject to the provisions of Sections 3 and 5.2 of this Sub-Advisory Agreement,
has complete discretion and authority in the investment and reinvestment of the
Investment Assets. Subject to specific written instructions of the Advisor, the
Sub-Advisor must determine what securities or other property will be acquired,
held, or disposed of and, subject to the provisions of Section 5.4 of this
Agreement, what portion of the Investment Assets will be held uninvested. The
Sub-Advisor's investment and reinvestment authority includes, without
limitation, authority to purchase, sell, exchange, convert, trade, and generally
to deal in the Investment Assets.
(b) Instructions to Custodian. The Sub-Advisor is hereby
authorized to give instructions to the Custodian with respect to the
consummation of transactions on behalf of the Advisor in the Investment Assets,
and the Sub-Advisor has authority to direct the Custodian with respect to the
investment and management of the Investment Assets. The Custodian is hereby
authorized to act in response to instructions given by the Sub-Advisor. The
Advisor agrees to take any action and deliver any certificates reasonably
necessary to confirm this authorization to the Custodian.
(c) Voting Rights. The Sub-Advisor's authority includes the
exercise of all voting rights pertaining to the Investment Assets. The
Sub-Advisor has the duty to maintain accurate records as to any vote or action
taken with respect to any stock or other securities which are part of the
Investment Assets and to take such further action as may be necessary for the
Fund to participate fully in any transaction undertaken by issuers of Investment
Assets.
5.2 INVESTMENT POLICY. Investment objectives, policies and other
guidelines for the management of the Investment Assets, including requirements
as to diversification, are set forth in Exhibit A to this Agreement. The
Sub-Advisor must discharge its duties hereunder in accordance with these
guidelines as revised or supplemented in separate written instructions provided
from time to time by the Advisor or the Fund's Board of Directors.
5.3 PRUDENCE AND DIVERSIFICATION. The Sub-Advisor must discharge its
duties under this Sub-Advisory Agreement at all times with the care, skill,
prudence and diligence that a prudent person acting in a like capacity and
familiar with such matters would use in conducting an enterprise of a like
character and with like aims.
5.4 MINIMUM LIQUIDITY REQUIREMENTS. The Advisor will give the
Sub-Advisor reasonable advance notice of any cash requirements from the
Investment Assets, and the Sub-Advisor will maintain in cash or cash equivalents
sufficient assets to meet such cash requirements.
5.5 BROKERS AND DEALERS.
(a) Instructions. The Sub-Advisor is hereby empowered to issue
orders directly to a broker or dealer for the purchase, sale or exchange of
securities with respect to the Investment Assets. The Sub-Advisor must give the
Custodian and the Advisor prompt written notification of each such execution in
accordance with the provisions of Section 6.1 of this Agreement, and the
Sub-Advisor must instruct the broker or dealer to forward copies of the
confirmation of the execution of the order to the Custodian and the Advisor.
(b) Selection of Securities Brokers and Dealers. The Sub-Advisor
may select and employ securities brokers and dealers to effect any securities
transactions concerning the investment management of the Investment Assets. In
selecting brokers and dealers and placing orders with them, the Sub-Advisor must
use its commercially reasonable best efforts to obtain for the Investment Assets
the most favorable net price and "best execution" available, except to the
extent otherwise provided by Section 28(e) of the Securities Exchange Act or by
other applicable law; provided, however, in seeking the best execution available
with respect to securities transactions involving the Investment Assets, the
Sub-Advisor shall give consideration to the overall quality of brokerage and
research services provided, it being understood and agreed that "best execution"
is not limited to obtaining the lowest commission for each transaction.
Notwithstanding anything in this subsection to the contrary, the Advisor may
instruct the Sub-Advisor in writing to engage securities brokers and dealers
specified by the Advisor to effect, with respect to the Investment Assets,
securities transactions or particular securities transactions, and the
Sub-Advisor must act in accordance with those instructions, provided the broker
appears on Sub-Advisor's list of approved brokers. The Sub-Advisor will not be
responsible or liable for any acts or omissions by any broker or dealer selected
pursuant to this subsection; provided that, the Sub-Advisor has acted reasonably
in the exercise of due care in the selection of the broker or dealer and has not
otherwise directly or indirectly participated in those acts or omissions by the
broker or dealer.
(c) Affiliated Brokers. Unless authorized in writing by the
Advisor, neither the Sub-Advisor nor any parent, subsidiary or related firm,
individual or other entity related to the Sub-Advisor will act as a securities
broker with respect to any purchase or sale of securities made on behalf of the
Fund.
5.6 OTHER ACCOUNTS OF THE SUB-ADVISOR. It is understood that the
Sub-Advisor performs investment advisory services for various clients and
accounts other than the Advisor. The Sub-Advisor may give advice and take action
in the performance of its duties with respect to other clients or accounts that
may be the same as or may differ from the timing or nature of action taken with
respect to the Investment Assets, provided that the Sub-Advisor allocates to the
Investment Assets, to the extent practicable and except as contemplated on
Schedule 5.6, opportunities to acquire or dispose of investments over a period
of time on a basis no less favorable than its allocation of such opportunities
to other clients and accounts and seeks over a period of time to obtain
comparable execution of similar transactions among its clients. Advisor
acknowledges and agrees that Sub-Advisor may aggregate purchase or sale orders
for the Fund with purchase or sale orders for the same security for other
clients' accounts where such aggregation is likely to result generally in a more
favorable net result for its clients; however, Sub-Advisor is under no
obligation to aggregate orders. It is understood that the Sub-Advisor will not
have any obligation to purchase or sell, or to recommend for purchase or sale,
for the Fund any security which the Sub-Advisor, its principals, affiliates or
employees may purchase or sell for its or their own accounts or for the account
of any other client, if in the opinion of the Sub-Advisor such transaction or
investment appears unsuitable, impractical or undesirable for the Fund.
5.7 LIABILITY OF SUB-ADVISOR. The Sub-Advisor shall act in good faith
in rendering services in connection with this Agreement. Nothing contained
herein shall make the Sub-Advisor be liable for any loss incurred by the Fund in
connection with services provided by the Sub-Advisor in accordance with this
Agreement so long as the Sub-Advisor acts in good faith and fulfills its duties
under this Agreement; provided, however, that nothing herein shall protect the
Sub-Advisor against liability to the Fund to which the Sub-Advisor would
otherwise be subject, by reason of its willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement. Nothing in this
Agreement shall protect the Sub-Advisor from any liabilities which it may have
under the Securities Act, the Investment Company Act or the Investment Advisers
Act.
6. INFORMATION AND REPORTS.
6.1 REPORTS TO ADVISOR. The Sub-Advisor must submit a daily written
report to the Advisor promptly following the close of regular trading on the New
York Stock Exchange detailing the actions taken by the Sub-Advisor under this
Agreement during that day. The report must contain the information in the form
that the Advisor has or will from time to time specify. In addition, the
Sub-Advisor must provide other reports on the performance of the Investment
Assets at such times, for such periods and in such form as the Advisor or the
Fund's Board of Directors reasonably request.
6.2 RECORDS AND ACCOUNTS. The Sub-Advisor must keep accurate and
detailed records and accounts of the Investment Assets and of all receipts,
disbursements and other transactions affecting the Investment Assets. The
Sub-Advisor will make all its records, accounts and documents relating to the
Investment Assets available at all reasonable times and under reasonable
conditions for inspection and audit by any person or persons designated by the
Advisor or the Fund's Board of Directors.
6.3 CODE OF ETHICS. The Sub-Advisor has adopted a written code of
ethics complying with the requirements of Rule 17j-1 of the Investment Company
Act and Rule 204A-1 of the Investment Advisers Act (the "Code of Ethics") and
has provided a copy of such Code of Ethics to the Fund; Sub-Advisor agrees to
provide a copy of the Code of Ethics to the Fund promptly after any material
changes are made. Within 20 days of the end of the second and fourth calendar
quarters, the Chief Compliance Officer of the Sub-Advisor shall certify to the
Fund that, with regard to the two most recently completed calendar quarters:
(a) The Sub-Advisor has provided to the Fund the Sub-Advisor's
Code of Ethics that is in effect;
(b) The Sub-Advisor has complied with the requirements of Rule
17j-1 and Rule 204A-1;
(c) The Sub-Advisor has adopted procedures reasonably necessary
to prevent its "Access Persons" (as defined in Rule 17j-1 of the Investment
Company Act) from violating the Code of Ethics; and
(d) There have been no violations of the Code of Ethics or, if
any violation has occurred, the nature of such violation and of the action taken
in response to such violation.
6.4 COMPLIANCE PROGRAM. The Sub-Advisor has adopted written policies
and procedures in compliance with the requirements of Rule 38a-1 of the
Investment Company Act and Rule 206(4)-7 of the Investment Advisers Act (the
"Compliance Procedures") and has provided a copy of such Compliance Procedures
to the Fund; Sub-Advisor agrees to provide a copy of the Compliance Procedures
to the Fund promptly after any material changes are made. Within 20 days of the
end of the second and fourth calendar quarters, the Chief Compliance Officer of
the Sub-Advisor shall certify that:
(a) The Sub-Advisor has provided to the Fund the Sub-Advisor's
Compliance Procedures that are in effect at that time;
(b) The Sub-Advisor has reviewed, during the preceding 12-month
period, the adequacy of its Compliance Procedures and the effectiveness of the
implementation of the Compliance Procedures;
(c) The Compliance Procedures are reasonably designed to prevent
violation, by the Sub-Advisor and its Supervised Persons, of the Federal
Securities Laws, including the Investment Advisers Act and related rules issued
by the SEC; and
(d) With regard to the two most recently completed calendar
quarters, there have been no violations of the Compliance Procedures or, if any
violation has occurred, the nature of such violation and of the action taken in
response to such violation.
6.5 PROXY VOTING RECORDS AND POLICY.
(a) The Sub-Advisor has adopted and implemented written policies
and procedures pursuant to Rule 206(4)-6 of the Investment Advisers Act that are
reasonably designed to ensure that the Sub-Advisor votes client securities in
the best interest of its clients (the "Proxy Voting Policy") and the Sub-Advisor
has provided a copy of such Proxy Voting Policy to the Fund; Sub-Advisor agrees
to provide a copy of the Proxy Voting Policy to the Fund promptly after any
material changes are made.
(b) Sub-Advisor agrees to provide to the Fund an accurate summary
of any vote cast or proxy granted by the Sub-Advisor on behalf of the Fund (the
"Voting Records"). Within 20 days of the end of the second and fourth calendar
quarters, the Sub-Advisor shall provide the Voting Records in the form specified
in writing to the Sub-Advisor by the Fund, and the Sub-Advisor's Chief
Compliance Officer shall certify that, with regard to the two most recently
completed calendar quarters:
(c) The Voting Records accurately reflect the votes cast and
proxies granted by the Sub-Advisor on behalf of the Fund during the preceding
two quarters, each of which vote or proxy was cast or granted in compliance with
the Sub-Advisor's Proxy Voting Policy; and
(d) The Sub-Advisor has provided to the Fund the Sub-Advisor's
Proxy Voting Policy that is in effect.
6.6 FORM ADV. Advisor acknowledges receipt of Sub-Advisor's Disclosure
Statement, as required by Rule 204-3 under the Investment Advisers Act of 1940,
prior to the execution of this Agreement. If provided less than 48 hours prior
to the date of execution of this Agreement, Advisor shall have the option to
terminate this Agreement without penalty in writing within five business days
after that date of execution; provided, however, that any investment action
taken by Sub-Advisor with respect to the Investment Assets prior to the
effective date of such termination shall be at the Fund's risk. The Sub-Advisor
agrees to provide a copy of its current Form ADV (Parts I and II) to the Fund
within 90 days of the end of each calendar year.
6.7 EXCHANGE OF INFORMATION. The Advisor and the Sub-Advisor agree to
provide the information that the Sub-Advisor or the Advisor, as the case may be,
reasonably requests to enable it to carry out its duties, obligations and
responsibilities under this Agreement or applicable law.
6.8 INFORMATION TO BE CONFIDENTIAL. All information and advice
furnished to or obtained by the Advisor or the Sub-Advisor under or in
connection with this Agreement will be treated as confidential and will not be
disclosed to third parties except as required by law. This provision must not be
construed to limit the Advisor's or the Fund's ability to comply with the
disclosure obligations of an investment company to its securities holders under
the federal securities laws. Notwithstanding the foregoing, the Fund agrees to
allow Sub-Advisor to inform others that they are a client of Sub-Advisor by
appearance on a representative list or other means.
7. FEE PAYABLE TO SUB-ADVISOR. For services provided under this Agreement,
the Sub-Advisor is entitled to receive from the Advisor a fee that is calculated
as a percentage of the current value of the Investment Assets, as set forth in
the Fee Schedule attached as Exhibit B. The parties agree that the Fee Schedule
can be modified from time to time in accordance with the Investment Company Act
upon approval in writing by the parties. The fee payable to the Sub-Advisor
shall be calculated as of the close of the last trading day of March, June,
September and December. This fee is payable in arrears as soon as practicable,
but not more than ten business days, after the last day of each calendar
quarter.
8. MEETINGS WITH ADVISOR AND FUND. A representative of the Sub-Advisor will
personally meet with the Investment Committee of the Advisor or its designated
representative as reasonably requested by the Advisor to explain the investment
and management activities of the Sub-Advisor and any reports related thereto, at
such times as may be mutually agreed upon by the Sub-Advisor and the Advisor. In
addition, upon request, each year, a representative of the Sub-Advisor will
attend one or more of the meetings of the Fund's Board of Directors and will be
prepared to discuss the Sub-Advisor's economic outlook, investment strategy,
individual holdings included in the Investment Assets and such other related
matters as the Board of Directors requests.
9. INDEMNIFICATION. In addition to any other rights the Advisor or the Fund
may have against the Sub-Advisor, the Sub-Advisor will indemnify the Advisor and
the Fund and hold them harmless with respect to any loss or damage, or costs or
expenses suffered by them as a result of (i) the Sub-Advisor's failure to
provide notice within one day to the Advisor or the Fund of any trade, transfer,
exchange, redemption or other corporate action that occurs with regard to a
portfolio security held by the Fund, or (ii) a breach by the Sub-Advisor of this
Agreement, or (iii) the willful misfeasance, bad faith or gross negligence of
the Sub-Advisor, or (iv) the willful misfeasance, bad faith or gross negligence
of any of the Sub-Advisor's employees, or agents acting under its supervision or
control performing any of its obligations and duties or (v) by reason of the
Sub-Advisor's reckless disregard of its obligations and duties under this
Agreement, the Investment Advisers Act or any other applicable law or
regulation; provided, the Sub-Advisor shall have no responsibility or liability
for any loss incurred by reason of any act or omission of the Advisor or the
Custodian.
10. AMENDMENT. This Agreement may be amended at any time by written
agreement of the parties, provided that any material amendment will not be
effective unless approved in accordance with the Investment Company Act.
11. TERM AND TERMINATION.
11.1 TERM.
(a) Effective Date. Except as set forth in sub-section (c) below,
this Agreement shall become effective upon approval by a Majority Vote of
Shareholders in accordance with the Investment Company Act (the "Effective
Date").
(b) Duration. Unless sooner terminated as provided herein, this
Agreement shall continue in effect for an initial period of one year from the
Effective Date, and it shall continue in effect from year to year, but only so
long as such continuance is specifically approved at least annually in
accordance with the Investment Company Act.
(c) Interim Term. This Agreement shall be effective on a
temporary interim basis from the day and year first written above until the
earlier of 150 days after such date or until it has been approved or rejected by
the Fund's shareholders in accordance with the Investment Company Act. With
regard to the provisions herein, except for this subsection 11.1, the effective
date of the interim period of this Sub-Advisory Agreement shall have the same
effect as if it were the Effective Date, as defined above.
11.2 TERMINATION.
(a) Automatic Termination. This Agreement shall automatically
terminate in the event of its assignment, within the meaning of Section 15(a) of
the Investment Company Act, unless an order of the SEC is issued exempting such
assignment. If at any time the Sub-Advisor ceases to be an "investment advisor"
in accordance with the Investment Advisers Act, this Agreement will
automatically terminate. No penalty or payment of any kind by the Advisor will
be due upon an automatic termination
(b) Termination by Advisor, Board of Directors of the Fund or
Shareholders of the Fund. This Agreement may be terminated at any time, upon
written notice to the Sub-Advisor, without payment of any penalty, by the
Advisor, the Board of Directors of the Fund or by a Majority Vote of
Shareholders. Notwithstanding that the effective date of any such termination
may be fewer than 30 days after the date of notice of termination, the
Sub-Advisor shall be compensated for 30 days after the date of notice of
termination, and such compensation shall not constitute payment of a penalty in
connection with such termination. Any compensation paid pursuant to this
subsection 11.2(b) shall be calculated based on the Investment Assets as of the
effective date of the termination.
(c) Termination By Sub-Advisor. The Sub-Advisor may terminate
this Agreement at any time upon 30 days' prior written notice to the Advisor and
the Fund.
(d) Prorated Fee. If this Sub-Advisory Agreement shall terminate
at any time other than at the end of a calendar quarter, the Sub-Advisor shall
be entitled to receive the fee set forth in Section 7 hereof for the portion of
the quarter elapsed prior to the date of termination, prorated on a daily basis.
12. MISCELLANEOUS.
12.1 ERRORS AND OMISSIONS POLICY. The Sub-Advisor agrees that, at its
sole expense, it will maintain an errors and omissions insurance policy that
covers the acts, errors and omissions by the Sub-Advisor and its employees and
agents during the term of this Agreement. Upon request of the Advisor, the
Sub-Advisor will promptly provide evidence of such insurance.
12.2 GOVERNING LAW; SEVERABILITY. This Agreement and its performance
shall be governed by and construed in accordance with the applicable laws of the
United States and, to the extent permitted by such laws, with the laws of the
State of Oklahoma. In case any provision of this Agreement is held illegal or
invalid for any reason, that illegality or invalidity will not affect the
remaining provisions of this Agreement but will be fully severable, and this
Agreement will be construed and enforced as if the illegal or invalid provision
had not been included herein.
12.3 NOTICES. Unless the parties otherwise agree, all notices,
instructions and advice with respect to matters contemplated by this Agreement
must be in writing and are effective when received. Delivery must be made
personally, by registered or certified mail, return receipt requested, overnight
courier or confirmed facsimile and addressed as follows:
Advisor: American Fidelity Assurance Company
X.X. Xxx 00000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Investment Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Fund: American Fidelity Dual Strategy Fund, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Chief Compliance Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
Xxxxxxxx Xxxxxxx
McAfee & Xxxx A Professional Corporation
Two Leadership Square
000 Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxxxx.xxxxxxx@xxxxxxxxxx.xxx
Sub-Advisor: Wedge Capital Management LLP
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx,
Executive Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change any of the above information by providing notice to the
other parties in the manner set forth above. All reports required to be
delivered by the Sub-Advisor to the Advisor pursuant to Section 6.1 of this
Agreement must be delivered in the manner specified from time to time by the
Advisor.
12.4 COMPLIANCE WITH LAWS. Nothing in this Agreement shall be deemed
to authorize the Sub-Advisor to effect any transactions in contravention of its
fiduciary obligations, duties or responsibilities under the Investment Advisers
Act, this Agreement or any other applicable federal or state laws or regulations
(including all applicable securities laws and regulations) or the rules of any
national securities exchange. The Sub-Advisor will at all times comply with the
Investment Advisers Act and other applicable laws, regulations and rules in
performing its duties under this Agreement.
12.5 NOTICE OF PARTNERSHIP CHANGES. Sub-Advisor will notify Fund of
any change in the membership of its partnership within a reasonable time after
such change.
12.6 W-9. Advisor authorizes Sub-Adviser to execute and deliver for
the Fund IRS Form W-9 (Request for Taxpayer Identification Number and
Certification). The Fund is not now (and will promptly notify Sub-Advisor should
it become) subject to back-up withholding.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Sub-Advisory
Agreement to be executed as of the day and year first above written. Each party
represents that it is duly authorized and empowered to enter into and perform
this Agreement.
FUND: AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
SUB-ADVISOR: WEDGE CAPITAL MANAGEMENT LLP
By: /s/ R. Xxxxxxx Xxxxx
Name: R. Xxxxxxx Xxxxx
Title: General Partner
Schedule 5.6
Other Accounts of Sub-Advisor
Sub-Advisor, at its sole discretion, may execute transactions relating to
the Investment Assets separately from, and subsequent to, transactions relating
to assets held on behalf of other clients in order to accommodate the Fund's
Investment Guidelines that necessitate manual, rather than electronic, review by
the Sub-Advisor.
EXHIBIT A
American Fidelity Assurance Company
American Fidelity Dual Strategy Fund
Investment Guidelines
I. INVESTMENT OBJECTIVES:
The Fund's investment objectives are, primarily, long-term growth of
capital and, secondarily, the production of income. Such objectives do not
preclude infrequent investments for short-term capital appreciation.
The Fund normally invests in a diversified portfolio consisting primarily
of common stocks based upon an assessment of particular industries or
companies. The Fund attempts to maintain sufficient cash balances to meet
variable annuity contract payments. The Fund's assets may be held in cash
or cash equivalents or in United States Government securities for this
purpose. The Fund does not engage in the purchase or sale of puts, calls or
other options or in writing such options.
The Sub-Advisor, after consulting with the Advisor and obtaining Advisor
approval, may determine that prevailing market and economic conditions
indicate that investments other than common stocks may be advantageous, in
which event investments may be made on a short-term basis in United States
Government securities, bonds, notes or other evidences of indebtedness,
issued publicly, of a type customarily purchased for investment by
institutional investors.
II. FUNDAMENTAL POLICIES:
The Sub-Advisor must comply with the following Investment Guidelines:
A. Not more than five percent (5%) of the value of the Investment Assets
placed with the Sub-Advisor will be invested in securities of any one
issuer, except obligations of the United States Government and
instrumentalities thereof.
B. Not more than ten percent (10%) of the voting securities of any one
issuer will be acquired.
C. Not more than twenty-five (25%) of the value of the Investment Assets
placed with the Sub-Advisor will be invested in any one industry.
D. No borrowings will be made.
E. The Sub-Advisor will ensure that the Fund does not act as an
underwriter of securities of other issuers.
F. Investment in real estate will be limited to shares of real estate
investment trusts investing in equity real estate, up to seven percent
(7.0%) of Investment Assets placed with the Sub-Advisor. Investment in
private placements and other illiquid assets will not be made.
G. No purchase of commodities or commodity contracts will be effected.
H. The Fund will not engage in the purchase or sale of puts, calls or
other options or in writing such options.
I. Loans will not be made except through the acquisition of publicly
traded bonds, debentures or other evidences of indebtedness of a type
customarily purchased by institutional investors.
J. Investment will not be made in the securities of a company for the
purpose of exercising management or control.
K. Investment in securities of other investment companies will not be
made except for money market funds. Up to ten percent (10%) of
Investment Assets placed with the Sub-Advisor may be invested in money
market funds, provided that not more than three percent (3%) of the
total outstanding voting stock of any one investment company may be
held.
L. Although the Fund does not intend to engage to a large extent in
short-term trading, the Sub-Advisor may make investments for the
purpose of seeking short-term capital appreciation.
M. Investments in repurchase agreements will be limited to the top
thirty-five (35) U.S. banks, by deposits, that are rated at least
"B/C" by Xxxxx, Bruyette, Woods, a national bank rating agency or a
comparable rating from a similar bank rating service. Additionally,
there must be an appropriate amount of excess collateralization
depending upon the length of the agreement, to protect against
downward market fluctuation and the Fund must take delivery of the
collateral. The market value of the securities held as collateral will
be valued daily. In the event the market value of the collateral falls
below the repurchase price, the bank issuing the repurchase agreement
will be required to provide additional collateral sufficient to cover
the repurchase price.
N. Short sales of securities will not be made.
O. Purchases will not be made on margin, except for such short-term
credits necessary for the clearance of transactions.
P. Investments in high-yield or non-investment grade bonds will not be
made.
Q. Investments in the equity securities of foreign corporations will be
limited to American Depositary Receipts ("ADRs"), other depositary
receipts and ordinary shares which are denominated in U.S. dollars and
publicly traded in the United States. Not more than thirty-five
percent (35%) of the Investment Assets placed with the Sub-Advisor
will be invested in foreign issuers. In addition, not more than twenty
percent (20%) of the Investment Assets placed with the Sub-Advisor
will be invested in issuers from any one foreign country. ADRs or
other depositary receipts must be issued by the Bank of New York,
Morgan Guaranty or Citibank. Depositary receipts issued by other
institutions must be approved in advance by the Advisor.
III. OTHER INVESTMENT GUIDELINES:
The following Guidelines are additional rules that the Sub-Advisor must
follow:
A. The Sub-Advisor should generally conform to these issuer guidelines
with exceptions noted at the time of purchase and variances reviewed
annually with the Board of Directors of the Fund.
1. A minimum market capitalization of one billion dollars
($1,000,000,000) at the time of purchase.
2. Audited financial statements for at least three (3) years of
operation.
3. Fifty million dollars ($50,000,000) or more in stockholders
equity.
B. Lending of securities will not be permitted.
C. The Fund will not invest in the securities of tobacco-producing
companies.
D. InvesTrust, N.A., or another custodian chosen by the Advisor, shall be
the Custodian of all Investment Assets placed with the Sub-Advisor.
The Sub-Advisor must ensure that duplicate brokerage confirmations of
all transactions are sent to the Custodian and the Advisor.
E. All money market funds used by the Sub-Advisor for a portion of
Investment Assets placed with the Sub-Advisor must be approved in
advance by the Advisor.
F. The money market funds (cash) used by the Sub-Advisor for a portion of
Investment Assets must have a balance at all times equal to at least
one percent (1.0%), but not more than three percent (3.0%), of the
market value of Investment Assets placed with the Sub-Advisor.
G. All brokers used by the Sub-Advisor to execute transactions for the
Fund must have a commercial paper rating of A1/P1 by Moody's and
Standard & Poor's unless approved in advance by the Advisor.
Appendix 1 to Exhibit A
This Appendix 1 to Exhibit A is provided in order to clarify certain
matters with regard to the Fund's Investment Guidelines. The numbers below refer
to the corresponding numbers in the Investment Guidelines.
II.B - Applies only to securities acquired on behalf of the Fund.
II.Q - Advisor approves any institution that: (1) issues depositary
receipts, and (2) is approved by Sub-Advisor.
III.G - Advisor approves all brokers used by Sub-Advisor.
EXHIBIT B
Fee Schedule
Pursuant to Section 7 of the foregoing Investment Sub-Advisory Agreement
(the "Sub-Advisory Agreement") made as of October 3, 2005, among American
Fidelity Dual Strategy Fund (the "Fund"), American Fidelity Assurance Company
(the "Advisor") and Wedge Capital Management LLP (the "Sub-Advisor"), the
parties thereto agree as follows:
For services under the Sub-Advisory Agreement, the Sub-Advisor shall be
entitled to receive from the Advisor a fee in an amount equal to 0.105% of the
current value of the Investment Assets as of the close of the last trading day
of March, June, September and December (0.42% on an annual basis).
The parties agree that this Fee Schedule is intended to serve as an interim
Fee Schedule, pending approval of the Sub-Advisory Agreement by the shareholders
of the Fund in accordance with the Investment Company Act of 1940. The parties
further agree that this Fee Schedule may not be amended until after such
shareholder approval has been obtained.
Upon obtaining the requisite shareholder approval, this Fee Schedule shall
be amended and restated to reflect a fee in an amount equal to 0.50% per year on
the first $25,000,000, 0.40% per year on the next $75,000,000 and 0.30% per year
on all Investment Assets over $100,000,000. Fees will be billed quarterly in
arrears, based on market value as of the last business day of the quarter.
Sub-Adviser shall not be compensated on the basis of a share of capital gains
upon, or capital appreciation of, the Investment Assets.
Dated as of the day and year first above written.
FUND: AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
SUB-ADVISOR: WEDGE CAPITAL MANAGEMENT LLP
By: /s/ R. Xxxxxxx Xxxxx
Name: R. Xxxxxxx Xxxxx
Title: General Partner
Amended and Restated Fee Schedule
Pursuant to Section 7 of the Investment Sub-Advisory Agreement (the
"Sub-Advisory Agreement") made as of October 3, 2005, among American Fidelity
Dual Strategy Fund (the "Fund"), American Fidelity Assurance Company (the
"Advisor"), and Wedge Capital Management LLP (the "Sub-Advisor"), the parties
thereto agree that the Fee Schedule appearing on Exhibit B of the Sub-Advisory
Agreement shall be amended and restated as follows, effective February 23, 2006:
For services under the Sub-Advisory Agreement, the Sub-Advisor shall be
entitled to receive from the Advisor a fee in an amount equal to 0.50% per year
on the first $25,000,000 of Investment Assets, 0.40% per year on the next
$75,000,000 of Investment Assets, and 0.30% per year on all Investment Assets
over $100,000,000. Fees will be billed quarterly in arrears, based on market
value as of the last business day of the quarter. Sub-Adviser shall not be
compensated on the basis of a share of capital gains upon, or capital
appreciation of, the Investment Assets.
Dated as of February 22, 2006.
FUND:` AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
SUB-ADVISOR: WEDGE CAPITAL MANAGEMENT LLP
By: /s/ R. Xxxxxxx Xxxxx
Name: R. Xxxxxxx Xxxxx
Title: General Partner
